Rules 44 and 44A explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Rule 44 says how to compute the credit to be reversed when a person opts for composition or the supply becomes exempt (section 18(4)) or when registration is cancelled (section 29(5)): inputs in stock by proportion of the invoices, capital goods by remaining useful life taken as five years. The amount becomes output tax liability, furnished in FORM GST ITC-03 or FORM GSTR-10. Rule 44A restricts credit on gold dore bar.
This article follows the Central Goods and Services Tax Rules, 2017 as amended up to 31 October 2025 in the compilation consulted; notifications issued after that date should be checked.
For the purposes of section 18(4) or section 29(5), credit on inputs in stock is worked out proportionately on the basis of the corresponding invoices, and credit on capital goods pro rata over the remaining useful life in months, taking the useful life as five years. The amount is determined separately for each of the four taxes and forms part of the output tax liability, furnished in FORM GST ITC-03 (section 18(4) events) or FORM GSTR-10 (cancellation of registration). Where invoices are missing, the amount is estimated at the prevailing market price on the effective date.
The sections behind the rule
Rule 44(1) names the two sections it serves: "sub-section (4) of section 18 or sub-section (5) of section 29". See section 18(4): reversal on opting composition or exemption and section 29(5): what you pay when registration is cancelled. Sub-rule (6) serves section 18(6); that sub-rule has its own post, selling a capital good: section 18(6) and rule 44(6). If you are about to opt for composition, or cancel registration, and want the reversal worked out before the return is filed, see our input tax credit reconciliation service.
Rule 44(1): how the amount is determined
The amount of input tax credit relating to inputs held in stock, inputs contained in semi-finished and finished goods held in stock, and capital goods held in stock "shall be determined in the following manner".
Clause (a): inputs. "For inputs held in stock and inputs contained in semi-finished and finished goods held in stock, the input tax credit shall be calculated proportionately on the basis of the corresponding invoices on which credit had been availed by the registered taxable person on such inputs."
Clause (b): capital goods. "For capital goods held in stock, the input tax credit involved in the remaining useful life in months shall be computed on pro-rata basis, taking the useful life as five years."
Illustration. The rule prints: capital goods have been in use for 4 years, 6 months and 15 days. The useful remaining life in months is 5 months, ignoring a part of the month. Input tax credit taken on such capital goods is C. The input tax credit attributable to the remaining useful life is C multiplied by 5/60. (Five years is sixty months, so the fraction is the remaining months over sixty.)
Rule 44(2): four taxes, separately
"The amount, as specified in sub-rule (1) shall be determined separately for input tax credit of central tax, State tax, Union territory tax and integrated tax." The footnote records that sub-rule (2) was substituted by Notification No. 17/2017 - CT dated 27.07.2017, effective from 01.07.2017.
Rule 44(3): estimate where invoices are missing
"Where the tax invoices related to the inputs held in stock are not available, the registered person shall estimate the amount under sub-rule (1) based on the prevailing market price of the goods on the effective date of the occurrence of any of the events specified in sub-section (4) of section 18 or, as the case may be, sub-section (5) of section 29."
Rule 44(4): output tax liability and the Forms
"The amount determined under sub-rule (1) shall form part of the output tax liability of the registered person and the details of the amount shall be furnished in FORM GST ITC-03, where such amount relates to any event specified in sub-section (4) of section 18 and in FORM GSTR-10, where such amount relates to the cancellation of registration."
For the final return in FORM GSTR-10 see rules 81 and 82 of the CGST Rules, 2017.
Rule 44(5): certification
"The details furnished in accordance with sub-rule (3) shall be duly certified by a practicing chartered accountant or cost accountant." Sub-rule (3) is the estimate where invoices are not available, so the certificate attaches to the estimated amount.
Rule 44(6): capital goods under section 18(6)
"The amount of input tax credit for the purposes of sub-section (6) of section 18 relating to capital goods shall be determined in the same manner as specified in clause (b) of sub-rule (1) and the amount shall be determined separately for input tax credit of Central tax, State tax, Union territory tax and integrated tax."
Proviso. Where the amount so determined is more than the tax determined on the transaction value of the capital goods, "the amount determined shall form part of the output tax liability and the same shall be furnished in FORM GSTR-1". The full treatment is in the linked post on section 18(6).
Rule 44A: gold dore bar
The rule is headed "Manner of reversal of credit of Additional duty of Customs in respect of Gold dore bar", inserted by Notification No. 22/2017 - CT dated 17.08.2017. It provides that "the credit of Central tax in the electronic credit ledger taken in terms of the provisions of section 140 relating to the CENVAT Credit carried forward which had accrued on account of payment of the additional duty of customs levied under sub-section (1) of section 3 of the Customs Tariff Act, 1975 (51 of 1975), paid at the time of importation of gold dore bar, on the stock of gold dore bar held on the 1st day of July, 2017 or contained in gold or gold jewellery held in stock on the 1st day of July, 2017 made out of such imported gold dore bar, shall be restricted to one-sixth of such credit and five-sixth of such credit shall be debited from the electronic credit ledger at the time of supply of such gold dore bar or the gold or the gold jewellery made therefrom".
Where the supply "has already been made, such debit shall be within one week from the date of commencement of these Rules". The rule names the Customs Tariff Act, 1975 and the section 140 transitional credit; check the current law for the corresponding provisions of the Customs Tariff Act, and see section 140: transitional input tax credit for the Act.
Who does what
| Who | What | Form | Rule |
|---|---|---|---|
| Registered person on a section 18(4) event or cancellation | Calculates credit on inputs proportionately by the corresponding invoices | Not applicable | 44(1)(a) |
| Same | Calculates credit on capital goods over remaining useful life in months; useful life five years | Not applicable | 44(1)(b) |
| Same | Determines the amount separately for each of the four taxes | Not applicable | 44(2) |
| Same, if invoices are not available | Estimates on prevailing market price on the effective date | Not applicable | 44(3) |
| Same | Treats the amount as output tax liability; furnishes details | FORM GST ITC-03 for section 18(4) events; FORM GSTR-10 for cancellation | 44(4) |
| Practising chartered accountant or cost accountant | Certifies the details of the estimate | Certificate | 44(5) |
| Holder of gold dore bar stock | Credit restricted to one-sixth; five-sixth debited at supply | Electronic credit ledger | 44A |
A worked example
Rajesh Hardware, an invented trader, opts to pay tax under the composition scheme, an event of the kind section 18(4) covers. On the effective date it holds inputs in stock and a machine that has been in use for 4 years, 6 months and 15 days. The credit taken on the machine was C.
For inputs, the credit is calculated proportionately on the basis of the invoices on which credit was availed. For the machine, the remaining useful life is 5 months, ignoring the part of the month, so the credit to be reversed is C multiplied by 5/60. Each tax (central, State or Union territory, and integrated) is worked out separately. The total forms part of Rajesh's output tax liability and is furnished in FORM GST ITC-03.
For some inputs the purchase invoices cannot be traced. Under sub-rule (3), Rajesh estimates the amount from the prevailing market price on the effective date of the event, and under sub-rule (5) the details are certified by a practising chartered accountant or cost accountant.
Points to watch
- Two sections feed one rule. Section 18(4) events use FORM GST ITC-03; cancellation of registration uses FORM GSTR-10.
- Part of a month is ignored in the remaining-life count, as the illustration states.
- The certificate is tied to the estimate. Sub-rule (5) speaks of the sub-rule (3) details.
- Four taxes, four calculations.
- Sale of capital goods under section 18(6) uses the same capital goods method, with the proviso on transaction value.
Need help working out a reversal?
Reversal figures are checked against the books when a registration is cancelled or an option changes. We prepare the computation by invoice, handle the capital goods method and the market price estimate, and file the Form that fits the event. See our input tax credit reconciliation service.
Key takeaways
- Rule 44 applies to events under section 18(4) and to cancellation of registration under section 29(5).
- Inputs: credit calculated proportionately on the basis of the corresponding invoices.
- Capital goods: pro rata over the remaining useful life in months, taking the useful life as five years.
- The amount is determined separately for central tax, State tax, Union territory tax and integrated tax and forms part of output tax liability, furnished in FORM GST ITC-03 or FORM GSTR-10.
- Rule 44A restricts credit on gold dore bar to one-sixth, with five-sixth debited at supply.
Read next
- Rules 41 and 41A of the CGST Rules, 2017: transfer of credit
- Rule 40 of the CGST Rules, 2017: manner of claiming credit in special circumstances
- Section 18(4): reversal on opting composition or exemption
- Section 29(5): what you pay when registration is cancelled
Disclaimer: Based on the Central Goods and Services Tax Rules, 2017 and the GST Acts as amended up to 31 October 2025 in the compilation consulted, read with the Finance Act, 2026 where this article says so, as consulted on 2 October 2026. Notifications, circulars and amendments issued after that date, the forms on the common portal and the way the tax authorities apply these provisions should be checked. This article is general information, not legal advice; check the official text before acting.